Comments on: The Panic of ’08: Recession Cause or Effect? http://wallstreetpit.com/11431-the-panic-of-2008-recession-cause-or-effect Wed, 08 Feb 2012 22:13:42 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: NonPopulist http://wallstreetpit.com/11431-the-panic-of-2008-recession-cause-or-effect#comment-72141 NonPopulist Thu, 22 Oct 2009 16:26:28 +0000 http://wallstreetpit.com/?p=11431#comment-72141 This is a dishonest article, Casey. The Ravi Jagannathan, Mudit Kapoor and Ernst Schaumburg does not say that the losses of employment we have had over the past 12 months were the inevitable cause of "global imbalances" and had nothing to do with the banking crisis. Rather, they are saying that the underlying causes of the crisis reflect greater structural challenges-- namely, a rise in the global labor force (the supply of capital) without a corresponding rise in the demand for global end goods and services. That is true. What they are not saying, however, is that the job market has nothing to do with the health of the banking system. So many people have said we should have not done anything and just "let the crisis run its course." I wish more than anything in the world that we could go back to last fall and create an "alternate reality" where we do just let things run its course and let the banks fail. We would see (1) a collapse in the commercial paper market, (2) bankruptcy of large sections of the Dow & S&P, including giants like GE, (3) as these companies go bankrupt, they liquidate rather than restructure in court due to lack of DIP financing, (4) 2-3 million job losses per month if we are lucky, (5) $3+ trillion deficits IF the government attempts to maintain statutory limits, (6) mass sovereign defaults all over the developing world, (7) probably another world war somewhere down the line. I would like the world to see that and then say don't bail out the banks. Let the populists rant and rave then. Unfortunately we have one world, and I'd rather see Ben Bernanke get beat up by the newspapers, blogs and politicians than see that reality come about. Good day, Casey Mulligan. This is a dishonest article, Casey. The Ravi Jagannathan, Mudit Kapoor and Ernst Schaumburg does not say that the losses of employment we have had over the past 12 months were the inevitable cause of “global imbalances” and had nothing to do with the banking crisis. Rather, they are saying that the underlying causes of the crisis reflect greater structural challenges– namely, a rise in the global labor force (the supply of capital) without a corresponding rise in the demand for global end goods and services. That is true. What they are not saying, however, is that the job market has nothing to do with the health of the banking system.

So many people have said we should have not done anything and just “let the crisis run its course.” I wish more than anything in the world that we could go back to last fall and create an “alternate reality” where we do just let things run its course and let the banks fail.

We would see (1) a collapse in the commercial paper market, (2) bankruptcy of large sections of the Dow & S&P, including giants like GE, (3) as these companies go bankrupt, they liquidate rather than restructure in court due to lack of DIP financing, (4) 2-3 million job losses per month if we are lucky, (5) $3+ trillion deficits IF the government attempts to maintain statutory limits, (6) mass sovereign defaults all over the developing world, (7) probably another world war somewhere down the line.

I would like the world to see that and then say don’t bail out the banks. Let the populists rant and rave then. Unfortunately we have one world, and I’d rather see Ben Bernanke get beat up by the newspapers, blogs and politicians than see that reality come about. Good day, Casey Mulligan.

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